Sell in May or Should You Stay?

Summertime “bears” versus “bulls:” Are investors who take a break from the stock markets in the summer and fall making a mistake?

By Bill Stone, Chief Investment Strategist, PNC Wealth Management

Just like baseball, cookouts and proms, the investment sing-song strategy of “Sell in May and go away” springs up this time every year. Don’t recall it?  It’s fairly simple: Stocks are sold at the start of May with the proceeds held in cash (money market funds), then used to buy new stock in the fall. Like most investment strategies, this one has its share of skeptics and fans.  But does it have real merit?

The “Sell in May” strategy has been around for a long time. The directive advises an investor to sell equities in May and return to stocks in six months, typically after October 31. Due to this dubious timing, this tactic is sometimes referred to as The Halloween Effect. Proponents of this investment strategy claim that stock returns in the summer months are significantly lower than those of the winter months. Though it’s unclear who first discovered this seasonal pattern, it was popularized by the Stock Trader’s Almanac in the 1980s.

Summer Doldrums on Wall Street: Fact or Fiction

PNC’s research validates that stock performance during the summer months is weaker, on average, than during the winter months. Using the S&P 500 index between 1950 through today, PNC noted that almost in two-thirds of the years winter stock performance returns bested those of the previous summer. In fact, the overall average return for the winter six-month period was over seven percent, more than five times the average of 1.3 percent for the other half of the year. 

This pattern holds over time. When analyzed by decade:

  • There is no 10-year period where the average summer return beat the average winter return.
  • In some decades, the summer returns, on average, were negative.
  • There was never a decade when the winter average was negative.
  • The winter average in this last decade (2000-2010), which was bookended by the dot-com bust and the Great Recession, came very close to being negative, but slid through on the upside.

Several theories have been offered as to why this seasonal returns pattern exists. Theories run from the mundane (traders are on vacation in the summer) to the more esoteric (the timing of American elections). It is clear, however, that trading volumes and investment flows do decline in the summer months. Some have claimed that it is purely happenstance that the greatest stock-moving events simply happen during the summer months.

It is also worth noting that while some of the biggest market corrections of late have occurred in the May-October period, it is unclear if this is just a coincidence. The last major bear market can be used as an example. Though it lasted between October 2007 and March 2009 when the S&P 500 declined about 57 percent, it was the May-October 2008 period when the index posted its greatest declines. The losses in the six months prior and after that summer were comparatively milder, though still significant by historical standards.

Hold or Fold

Given that a seasonal pattern does exist, should an investor go ahead and sell in May? More specifically, is it possible to use this strategy to generate higher overall returns? The data show that a buy-and-hold strategy continues to provide the best performance. Indeed, using such a strategy could almost double the returns seen by a November-April holding strategy.

By exiting the equity market during the summer, an investor could potentially miss out on any increase in prices, even if such appreciation is comparatively rare. Even during the meager returns of the last year, the S&P 500 actually performed slightly better during the May-October timeframe than November-April.  

Given the seasonal market slowdown in May-October, it could be beneficial to rebalance a portfolio before the start of the summer if equities are overweighted relative to the target allocation. If appropriate for goals and risk tolerance, the rebalancing in May could manage the seasonal pattern while still maintaining a position to equities.

Personalized Road Map

Though a seasonal pattern appears to exist, we do not believe this is reason enough to warrant changing one’s existing investment strategy. A well-planned investment strategy, customized to the needs and risks of the individual, remains the best roadmap for superior long-term performance. 

Learn more about the custom investment strategies PNC offers. 


PNC Chief Investment Strategist Bill Stone believes the best strategy is a long-term strategy.

The data shows that a buy-and-hold strategy continues to provide the best performance. Indeed, such a strategy would almost double the returns seen by a November-April holding strategy.